He allocated an additional US$34.9 million to a research and development fund for the pharmaceutical sector and said the government would increase the fund in phases to help develop new drugs.

India has the potential to become an attractive destination for outsourcing drug discovery and clinical research, and for international collaborations in drug development and manufacturing, said Chidambaram.

He added that the country could also emerge as a global leader in supplying novel agricultural and healthcare technologies and products.

The budget also increases funding for the Department of Biotechnology — up by 27 per cent to US$106 million.

Two additional science-related initiatives announced by Chidambaram are in keeping with the budget's overall focus on improving rural infrastructure and economies, and alleviating poverty.

The first is a new US$11.6 million National Fund for Strategic Agricultural Research, aimed at reviving and diversifying agricultural research, and strengthening and modernising Indian agricultural universities and research institutions.

The second initiative is the allocation of US$23.3 million to support an alliance of 80 organisations that pledged last year to set up a Rural Knowledge Centre, using modern information and communication technologies, in each of India's 600,000 villages by 2007 (see India sets up alliance on ICTs for the poor).

The budget also allocated an additional US$23.3 million to the Indian Institute of Science in Bangalore as a first step in Indian plans to develop world-class universities.